ASIC has much to answer
The planner, Rick David Gillespie, was due to appear in the Administrative Appeals Tribunal in Brisbane on Monday to appeal a permanent banning order placed on him by the Australian Securities and Investments Commission in November 2012. Gillespie withdrew his application on Thursday - the day after submissions were opened by the Senate on the performance of the regulator and its role in the Commonwealth Bank financial planning scandal, including Gillespie.
It is understood that ASIC had lined up four of Gillespie's victims to give evidence, along with a handwriting expert. His decision to withdraw his appeal means he will be banned permanently from providing financial services advice.
ASIC will not be referring the matter to the Director of Public Prosecutions or police on the basis there is "insufficient evidence".
Gillespie is one of seven Commonwealth Bank financial planners who were banned by the regulator for misconduct. He and other planners, including Don Nguyen, hit the headlines last month when myself and colleague Chris Vedelago launched a series of stories into a scandal and cover-up at CBA's financial planning arm and the failure of ASIC to act promptly.
The scandal triggered a bipartisan Senate inquiry into the performance of ASIC. Submissions opened on July 10 and will close on October 21. A hearing will begin shortly after and a report is set to be handed down by the end of March.
The reports revealed that a group of CBA insiders first contacted the regulator in October 2008 with detailed information about the goings on at the bank's financial planning arm. A few months later the bank handed the regulator a file on Gillespie with allegations of forgery and fraud and a subsequent updated report in August 2010.
Neither the bank nor ASIC covered themselves in glory over their handling of Gillespie or the financial planning scandal.
In the bank's case, it first became aware of forgery allegations and fraud and the alleged overcharging of Gillespie's clients in October 2008 in a compliance report obtained by Fairfax Media, but he didn't resign until June 2009.
Indeed, a memo showed that the bank's internal compliance unit had discussed hiring a handwriting expert to investigate the forgeries but believed it would cause a "degree of heartburn" as it might cost up to $6000.
After Gillespie resigned, the bank handed his file to ASIC. It took ASIC another 3½ years to scrub him out of the industry. During that time he continued to work as an adviser for two different businesses.
His clients and his employers had no knowledge he had left CBA under controversial circumstances or that he was the subject of an ASIC investigation.
In the lead-up to the inquiry, Nationals senator John Williams has more than 100 questions on notice to ASIC, which it has to respond to by Wednesday.
These questions were posted on Thursday and include whether ASIC had been made aware of or investigated claims that employees of CBA were involved in "sanitising" of affected clients' files, "whether the group executive responsible from the financial planning division in or around 2008 and 2009 [who was copied into one of the emails from the whistleblower] was still employed by CBA".
Other questions include whether the managers of the bank's financial planning business were still employed in management roles in the financial services industry.
"How is a clear message sent to the industry when persons at a lower level are banned but the general managers are still running significant financial services businesses?" Williams asked.
Since the stories appeared, there have been hundreds of emails and phone calls from victims and former bank staffers adding new information.
The scandal has raised questions about the conflicts of interest of vertically integrated institutions such as banks owning financial planning arms. Unfortunately, the new regulatory regime, the Future of Financial Advice, which came into effect on July 1, doesn't deal with this conflict. FOFA bans "conflicted remuneration", but the vertically integrated employer will find a way to provide incentives for staff to maximise profits. Sales staff will always work to sales targets.
As one independent adviser said: "You would expect a Ford dealer to sell you a Ford, whether it was the right car or not, or whether you even need a car.
But for some reason our community thinks they will magically get advice in their best interest when they walk through the doors of a product manufacturer."
Let's hope the Senate inquiry covers some of this.
Frequently Asked Questions about this Article…
Rick David Gillespie was a senior Commonwealth Bank (CBA) financial planner who was the subject of allegations of forgery of client signatures, deceptive and misleading conduct, and overcharging clients. He withdrew an appeal against a permanent banning order placed on him by the corporate regulator, meaning he is now permanently banned from providing financial services advice.
Gillespie withdrew his application to appeal the banning order the day after Senate submissions opened into ASIC’s handling of the CBA financial planning scandal. The withdrawal means the permanent ban stands. The article also notes that while under investigation he continued to work as an adviser for other businesses and his clients and employers were not aware of the controversy.
No. According to the article, ASIC will not be referring the Gillespie matter to the Director of Public Prosecutions or police on the basis that there is 'insufficient evidence.'
The article says CBA insiders first contacted ASIC in October 2008 and handed the regulator a file on Gillespie (with updates in August 2010). After the bank handed his file to ASIC, it took ASIC another about three and a half years to remove him from the industry.
A bipartisan Senate inquiry was triggered by the CBA financial planning stories. Submissions opened on July 10 and close on October 21, with hearings to begin shortly after and a report expected by the end of March. Nationals senator John Williams has put more than 100 questions on notice to ASIC as part of the inquiry process.
The article highlights concerns about conflicts of interest in vertically integrated institutions that own financial planning businesses. It notes that the new regulatory regime (FOFA) bans 'conflicted remuneration' but does not directly address the conflict inherent in an employer that also manufactures products—creating incentives for staff to meet sales targets. An independent adviser quoted in the article compared it to expecting a Ford dealer always to act in the customer’s best interest.
The article states that Gillespie was one of seven Commonwealth Bank financial planners who were banned by ASIC for misconduct.
The article lists examples of questions being put to ASIC, including whether ASIC investigated claims that CBA employees 'sanitised' affected client files, whether senior executives linked to the financial planning division in 2008–09 remained employed by CBA, and how a clear message is sent to the industry when lower-level advisers are banned but general managers continue to run significant financial services businesses.
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